to 29 September 2018
Group Highlights Operating Revenue EBITDA margin R10.5bn 16.2% R1.9bn +7.8 % +11.1 % +50 bps Profit to Dividend HEPS shareholders per share R1.3bn 494.3c 311.4c +11.6 % +11.6 % +12.4% 1
Macroeconomic environment GDP Growth Unemployment ZAR/USD rate Inflation - 0.7 % 27.5 % R14.06 +5.0 % Q2 2018: R12.65 Q1 2018: -2.6% Q2 2018: 27.2% Q2 2018: +4.5% Q2 2017: +2.9% Q3 2017: 27.7% Q3 2017: R13.18 Q3 2017: +4.8% Q3 2018 Q3 2018 Q3 2018 Q2 2018 Two consecutive periods of declining GDP growth Rand depreciated 21% (Jan to Sep ‘18 avg close), putting SA into technical recession negatively impacting importers & economy Unemployment remains unacceptably high. Job Rising inflation driven by fuel prices, VAT rate creation policies from government are critical for increase from 14% to 15% on 1 April ‘18 and a sustainable economic growth weakening Rand 2 Source: Stats SA, Thomson Reuters Eikon
Consumer environment Consumer Household Disposable Retail sales confidence expenditure income -1.3 % -1.0 % +3.7 % 22 Index points Q1 2018: 26 points Q1 2018: +1.0% Q1 2018: +0.9% Q2 2018: +3.8% Q2 2017: -9 points Q2 2017: +3.8% Q2 2017: +4.6% Q3 2017: +8.0% Q2 2018 Q2 2018 Q2 2018 Q3 2018 While still optimistic about their future prospects, Disposable income has been falling & now reports consumers’ short term reality has been one of negative growth across households, a reflection of continued constrained spending power weak job & consumer markets This has been reflected in household expenditure This has led to retail sales momentum slowing, with declining in Q2 2018, led by reduced spending on growth above GDP likely driven by rising consumer durables & semi durables price inflation 3 Source: BER, SARB, Stats SA
SA retail environment Technical Global recession financial 7 crisis 5 % change 3 1 -1 -3 2008 2010 2012 2014 2016 2018 YTD Comparable sales Household expenditure GDP Average comparable sales across 5 retailers: MSM, MRP, TFG, TRU & *WHL) over the last 10 years. Current levels reflect the tough economy Consistent downward trend in GDP growth & household expenditure since the global financial crisis recovery 4 Source: J.P. Morgan company reports *WHL: sales weighted average of SA Food & FBH
Consumers are looking for value Key reasons for choice of retailer MRP the most shopped apparel retailer in the last month Woolworths 12% Other 1% Truworths 12% Store card 2% Jet 19% Range/selection 2% Edgars 20% Checkers 21% Promos and specials 5% Ackermans 26% Brand 6% Clicks 31% Fashionability 7% Spar 33% Pep 34% Quality 9% Pick n Pay 37% 30% Value for money MRP 38% Price 37% Shoprite 68% 0% 5% 10% 15% 20% 25% 30% 35% 40% 0% 25% 50% 75% Source: HSBC ‘Anatomy of the consumer’ Sep 2018 Source: Broadcasting Research Council – Establishment Survey Products & Brands Oct 2018 5
Sound long term investment case Highest Return on Invested Capital (ROIC) ROE ROA 40 40 36 30 FY’18 ROIC (%) MRPG: 29.2% 30 MRPG: 39.2% 23 22 20 20 15 13 Market: 10.6% Market: 13.7% 10 10 10 year % change in ROIC 1 0 0 -10 -9 Operating cash Debt/equity -16 flow/sales -20 -21 -30 MRPG: 19.0% MRPG: 3.3% -37 -40 Market: 13.3% Market: 45.9% Comp A Comp B Average Comp C MRPG Source: Company financials Source: Thomson Reuters Eikon FY18 Market: Average across 4 SA retailers 6
Earnings & dividend per share 2018 2017 % change Profit attributable to shareholders (R’m) 1 279 1 138 12.4% W. Avg shares in issue (000) 1 258 630 258 196 0.2% Basic earnings per share 494.4c 440.9c 12.1% Addbacks (R’m) 2 0.1 5 (101.9%) Headline earnings (R’m) 1 279 1 143 11.9% Headline earnings per share 494.3c 442.9c 11.6% Shares for diluted earnings (000) 3 265 030 263 436 0.6% Diluted earnings per share 482.4c 434.1c 11.1% Dividend per share 4 311.4c 279.0c 11.6% 1 Movement relates to LTI schemes’ shares vesting. Shares previously held by trusts now back in the market 2 Loss on disposal/ impairment of PPE & intangibles 3 Higher dilution impact than PY - weighted average share price 37.2% higher - weighted average share options outstanding 4.2% lower 4 Payout ratio maintained at 63% of HEPS 7
Retail sales growth drivers Geography Tender type RSA Non RSA Cash Credit +7.5 % +2.2 % +6.2 % +11.4 % Channel Merchandise Store Online Unit growth RSP inflation +6.4 % +30.1 % +2.9 % +4.5 % 8
Revenue & profit growth in all chains Trading division RSOI Trading segment Contribution Growth *RSOI Operating profit Operating margin mrp 56.6% +5.9% +6.2% +11.2% 16.9% mrpSport +7.1% 6.6% Miladys 6.9% +8.3% Apparel mrpHome +8.4% +8.4% 16.4% +7.2% +13.8% 14.3% SheetStreet 7.0% +4.5% Home +23.5% +3.8% 31.1% 6.5% mrpMoney +23.5% Financial Services & Cellular *RSOI: Retail Sales & Other Income 9
Group income statement R'm 2018 2017 % change Retail sales & other income (pg 11) 1 10 436 9 711 7.5% Gross profit 2 4 278 3 918 9.2% Expenses 3 2 987 2 774 7.7% Profit from operating activities 1 693 1 526 10.9% Net finance income 101 67 49.9% Profit before taxation 1 794 1 593 12.6% Taxation 4 515 454 13.5% Profit after taxation 1 279 1 139 12.3% Profit attributable to shareholders 5 1 279 1 138 12.4% 1 RSOI growth first 4 months FY19 (SENS) +7.4% 2 Mainly due to improved markdowns in all chains 3 Excluding Kenya growth in overheads of 6.6% is lower than RSOI growth of 6.9% 4 Effective tax rate 28.7% (PY 28.5%) 5 Acquired minority interest in mrpMobile MVNO in Jan 2018 10
Revenue analysis R'm 2018 2017 % change Retail sales 1 9 738 9 135 6.6% Total other income 698 576 21.2% Financial services & cellular (pg 28) 2 673 545 23.5% Other 3 25 31 (18.7%) Total retail sales, interest & other income 10 436 9 711 7.5% Finance income 4 103 67 54.8% Total revenue 10 539 9 778 7.8% 1 Retail sales growth per trading update 1 Apr to 4 Aug ’18 of 6.6% 1 Easter/school holidays in Mar ’18 vs Apr ’17 1 Sales growth higher than market growth per *Stats SA of 3.7% (Type D +3.3%; Type E +6.4%) 2 Strong growth in cellular 3 Excluding insurance claim of R11m in PY growth was 25.1% 4 Interest on higher cash balances (refer cash flow pg 33) 1Excludes VAT *Market per Stats SA includes VAT 11
Non RSA sales Local currency performance against ZAR Stores Sales Growth Growth 120 total contr. local ZAR 115 BWP Namibia 40 35% (5.7%) (5.7%) 110 index to 100 (ZAR) KES 105 Botswana 25 22% 5.6% 7.5% NGN 100 Swaziland 11 8% 33.6% 33.6% AUD 95 GHS 90 Lesotho 5 4% 10.7% 10.7% ZMW 85 Total BNLS 81 69% 3.0% 80 Apr May Jun Jul Aug Sep Nigeria 5 5% (11.1%) (9.2%) Zambia 11 9% 31.1% 21.4% Kenya 12 7% Performance in Africa viewed on a portfolio basis Ghana 4 5% 32.6% 25.0% Stronger Rand in Q1 FY19, depreciated in Q2 Australia 3 2% (38.2%) (39.9%) Kenya includes recently acquired franchise stores Total owned stores 116 97% 11.7% Franchise stores include recently opened stores in DRC & Uganda. Excluding Kenya, growth was 53.7% Franchise & online 11 3% 1.4% Australia reduced space by 34.7% Total 127 100% 11.4% 12
Africa Kenya • All 12 franchise stores acquired in May ’18 Corporate owned were trading by mid June (7 apparel, 5 Home) • Performance impacted by new customs Franchise Not present processes, mode of transport requirements & duty increase. Expect better performance in H2 Ghana • Improved growth across all stores Zambia • Improved stock flow & inventory levels • New store space identified • Double digit sales growth at strong operating margins • Sheet Street test stores (2) trading ahead of forecast Nigeria • Port congestion & strikes have been impacting performance • Significant reduction in lead time & improved stock flow BNLS since end Aug 18 - positive impact on sales growth • Namibia’s poor economic climate continues to impact • Long term opportunity exists in Nigeria - growing middle performance - high unemployment in mining & construction class & low international brand penetration • Botswana Swaziland & Lesotho performed well with • Commissioned local advisors to undertake a detailed opportunities existing for further growth process analysis to support future growth opportunity 13
Space growth 1286 Closures Reductions Expansions New stores Nett space 6 13 2 34 Stores stores -1.0% -1.4% 0.4% 3.4% 1.4% Space growth : w.avg -1.1% -1.7% 0.4% 3.3% 0.9% : closing 495 178 107 301 205 stores stores stores stores stores 15 new stores 7 new stores 2 new stores 8 new stores 2 new stores 0 expansions 1 expansions 0 expansions 1 expansions 0 expansions 2 reductions 3 reductions 2 reductions 4 reductions 2 reductions 1 closures 0 closures 0 closures 1 closures 4 closures 14
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